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Bayer Offers to Buy Monsanto for $62 Billion Bayer Offers to Buy Monsanto for $62 Billion
(about 20 hours later)
LONDON — Bayer of Germany said on Monday that it had offered $62 billion in cash to acquire Monsanto in a deal that would combine two of the world’s biggest companies in the businesses of crop seeds and pesticides. The German industrial giant Bayer has finally revealed its $62 billion takeover bid for Monsanto as it seeks to create a new titan in the world of farming.
The transaction, if consummated, would create an industry giant whose products include antibiotics, genetically modified crops and pesticides. It would have a combined annual revenue of more than $67 billion. But so far, the chemical maker’s ambitious announcement — it is the largest takeover bid by a German company and the biggest all-cash acquisition offer on record — appears to have fallen on deaf ears.
Bayer said it decided to make details of its proposal public after market speculation and investor inquiries about a potential deal. The companies confirmed last week that Bayer had approached Monsanto about a potential tie-up. Monsanto said then that its board of directors was reviewing the proposal. Monsanto, based in St. Louis, is the world’s biggest manufacturer of genetically modified crop seeds. Bayer is hoping to unite that business with its own pesticide operations, forming a one-stop shop for farmers. The combined company, with $67 billion in sales, would produce an array of products including pain medication, G.M.O. seeds and pesticides.
Bayer said it would be willing to pay $122 a share for Monsanto, representing a 37 percent premium to Monsanto’s closing price on May 9, the day before Bayer made its proposal. It is an outsize takeover bid that requires the German company to win over antitrust regulators who may be leery of a huge new titan in the agricultural business. But more important, Bayer needs to win over skeptical investors.
“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” Werner Baumann, the Bayer chief executive, said in a news release. “Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees and the communities in which we operate.” Shares in Bayer tumbled nearly 6 percent on Monday after the announcement, to 84.42 euros, or about $95, as shareholders seemed to register displeasure over the high-priced plan. The company already bears a high debt load, some €17 billion, about $19 billion, after a string of acquisitions in the last three years.
The combined company’s seeds business and North American headquarters would be in St. Louis, where Monsanto is based. The company’s pesticides and crop science business would be based in Monheim, Germany. Bayer said it expected to achieve annual cost savings of about $1.5 billion after three years if the two companies were combined. The all-cash offer of $122 a share would probably require Bayer to take on additional debt, as well as issue new stock that would dilute existing shareholders. The company said it was “confident” in its ability to raise the money after having consulted with its lenders, Bank of America Merrill Lynch and Credit Suisse.
Bayer said it intends to finance the transaction with debt and equity and is “confident” in its ability to do so after advanced discussions with its lenders, Bank of America Merrill Lynch and Credit Suisse. Shares in Monsanto traded well below Bayer’s offer, closing on Monday at $106, suggesting skepticism that a deal will be reached at the current offer.
The German company said its supervisory and management boards had unanimously approved the proposal and were “fully committed” to the transaction. It is unclear whether other agricultural companies, including the fellow German manufacturer BASF, will make rival bids.
The proposal came after Dow Chemical and DuPont agreed to merge last year and Monsanto made an unsuccessful bid to acquire Syngenta, a Swiss pesticide maker. Analysts also said that Bayer would probably need to raise its bid to succeed with the deal — a prospect that appeared unattractive to its shareholders.
Monsanto offered to pay about $47 billion for Syngenta, but the Swiss company repeatedly rejected its approaches, saying the offer was too low and that such a deal would have trouble winning regulatory approval. On Monday, Monsanto said only that its board was reviewing the proposal. Last week the companies confirmed that an approach had been made.
Syngenta agreed in February to be acquired by China National Chemical Corporation. Buying Monsanto would give Bayer bulk as other giants in agriculture have turned to mergers to gain scale. Dow and DuPont agreed last year to an enormous, complicated merger that will fuse their crop science businesses.
And Syngenta, a Swiss pesticide maker that Monsanto unsuccessfully courted last year, agreed in February to sell itself for $43 billion to the China National Chemical Corporation.
Among Bayer’s arguments is that farmers must greatly raise their productivity to feed the world’s growing population, and that buying Monsanto would position the German company to become a supplier of choice.
The combined company’s seed business and North American headquarters would be in St. Louis. Its pesticide and crop science business would be based in Monheim, Germany. Bayer said it projected annual cost savings of about $1.5 billion after three years if the two companies combined.
“We have long respected Monsanto’s business and share their vision to create an integrated business that we believe is capable of generating substantial value for both companies’ shareholders,” Werner Baumann, Bayer’s chief executive, said in a news release. “Together we would draw on the collective expertise of both companies to build a leading agriculture player with exceptional innovation capabilities to the benefit of farmers, consumers, our employees and the communities in which we operate.”
The takeover bid represents a test of Mr. Baumann, who became Bayer’s chief just three weeks ago.
Government regulators in the United States and Europe are expected to closely scrutinize any union of the two. While the companies operate in separate businesses — Monsanto focuses on seeds, Bayer on pesticides — combining them could give the merged company more pricing power over farmers.
European countries, including Germany, have also sounded alarms over the use of genetically modified crops, potentially auguring resistance for Bayer in its home country.
And the National Farmers Union, which represents family farms in the United States, said that it was “troubled” by the prospective merger.
The president of the trade group, Roger Johnson, said in a statement: “Given the proposed merger between Dow and DuPont and the pending acquisition of Syngenta A.G. by China’s National Chemical Corporation, we ask that the Department of Justice thoughtfully consider and apply critical review to any pending and future deals, including a Bayer/Monsanto deal, that would break down marketplace competition in an already heavily concentrated agriculture sector.”